Banking – RI Future

December 10, 2015December 10, 2015

Banking for Equality

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

As of January 1, the Rhode Island minimum wage will be raised to $9.60. Although a good step towards financial equality, it cannot compensate for the nation’s polarizing wealth divide. We need banks to do that.

In 2013, 63 million Americans spent a combined $455 billion nationwide on alternative financial services, as reported by the Federal Deposit Insurance Company. This includes scams such as payday loans, pawnshops, and check-cashing services. Pay day loans offer immediate loans with steep interest and short payback, pawn shops take expensive collateral with hefty fees for small cash loans, and check-cashing services charge significant flat-rates, often around $40 per paycheck. United For A Fair Economy believes alternative financial services outnumber McDonald’s and Starbucks franchises combined in America today. Alternative financial services set up in areas they believe densely impoverished to prey on the financially disadvantaged. Institutionally, they operate to widen the wealth gap.

In his 2014 campaign, Rhode Island General Treasurer Seth Magaziner highlighted that one in four Rhode Islanders are underbanked. In Magaziner’s words, underbanked citizens “don’t have a bank account at all, or they have a bank account and they’re still relying on high-cost financial services like payday loans, pawn shop check cashing and so on.” Of the 63 million consumers that are underbanked in America, 24 million of them have no bank account at all. The families with limited bank account usage spend an average of $3,000 a year working while the average underbanked family spends $43,000 in their careers on check-cashing services. For these 63 million underbanked Americans, the vision of banks is a dark one. Among the most common reasons for using alternative financial services instead of banks, the top responses were “lack of money”, “I don’t like dealing with or trust banks”, “inconvenient hours or location.” These responses show a fundamental misunderstanding of the comparably greater convenience, affordability, and security of banks.

Communicating this is one of the smaller barriers banks have traditionally held, like extensive documentation, high minimums and maintenance fees, and new account screenings. Others responded “account fees are too high or unpredictable.” Many of these individuals live paycheck to paycheck and do not earn enough to meet minimum balance or direct deposit requirements for free checking. What should they do?

Put money in the bank. Bank accounts provide the financial security needed to build wealth. While accumulating interest, your money is protected from fires, burglary, misplacement, or other damage. With a bank account you build a credit history, critical for loans for cars, for home mortgage, and for higher education. And bank accounts are cheaper and more convenient than alternative financial services, from free bill pay, to free check cashing, to free ATM withdrawal.

As of 2015, nine banks or credit unions in Rhode Island have little to no minimum balance requirement nor require direct deposit for free checking. Many have no minimum balance and free checking. Almost all have free online statements, credit building opportunities, mobile banking, and free ATM access. Looking to the future, financial literacy is on the rise in Rhode Island’s schools, and a new state backed program College Bound incentivizes saving for the higher education of Rhode Island’s next generation.

Banks still need lower entry barriers for Rhode Islander’s looking to open checking accounts. New account screenings must offer forgiveness for previous debts. With financial guidance banks could aid in paying off the prior institution to which their new customer is indebted. It is equally as crucial that banks and credit unions offer an entry-level checking account with no minimal fees and balances.

Some banks would object to the operating cost they incur for maintaining an account with little immediate return. These banks need to look forward. The short term loss in revenue will be returned manifold as Rhode Island’s poor accumulate the wealth they then reinvest in said bank. Banks understand the delayed but greater return of a bond. Banks need to bond with Rhode Island’s consumer, for delayed but greater returns for both.

America today resembles a plutocracy. The assets of the top 1 percent is now approaching 45 percent of the nation’s wealth, having steadily risen toward levels unseen since the Great Depression. The wealth of the bottom 90 percent continues to hover between 10-20 percent of the nation’s wealth for the last century. The stagnant trend makes clear that growth in national income has not yielded a more equitable distribution of wealth.

Expert on urban and racial inequality and poverty, Melvin Oliver says, “Income feeds your stomach, but assets feed your head.” Many Rhode Island stomachs will be fuller by sixty cents an hour come January 1st. But will their heads will still be hungry? Wealth breaks the cycle of living day to day. Alternative financial services drain wealth while banks can nurture it. Rhode Island and Rhode Island’s banks: stop living day to day on pennies, and bond.

January 7, 2015January 7, 2015

Best wishes Tom Sgouros, new adviser to Seth Magaziner

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

It’s always gratifying when one of the best and most deserving folk actually get a position in government where they can make a powerful difference. We recently learned that RI Future contributor Tom Sgouros has been appointed as senior policy adviser to Seth Magaziner, the new treasurer of Rhode Island.

Tom was himself a candidate for the office of treasurer in 2010 but dropped out early in the race that Gina Raimondo would go on to win. He is known for his incisive, well-researched and often sarcastic insights into the economics and policies of Rhode Island.

In addition to writing for RI Future, Tom recently started — and will suspend — an excellent column in the Providence Journal. Which is a shame, but a fair tradeoff for honesty and transparency in government.

Tom’s most recent book, Checking the Banks is subtitled “The Nuts and Bolts of Banking for People Who Want to Fix It”, so it looks like they’ve picked the right person for the right job.

sgouros book ad — “This is a marvelous book! Well-written—even enjoyable to read—about local banking! ” — Gar Alperovitz, author of What Then Must We Do?

In the book, Tom goes into great detail about what’s wrong with the banking system, like the mortgage crisis, lack of loans to small businesses, and predatory practices. He also offers alternatives, solutions and possibilities for change.

We hope that Tom and Treasurer Magaziner will create bold initiatives to make banking more innovative. Maybe we can start our own state bank, and save taxpayers millions while priming the local economy’s pump…

At the beginning of the session everything is possible. Now the hard work begins.

(DISCLAIMER: As the editor and publisher of two of Tom’s best books, this article is 100% biased and slanted.)

April 15, 2013

Jack Reed takes it to the banks and their regulators

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

There’s been a surprising dearth of coverage in the local press of Jack Reed’s exemplary work last week, as he stuck it to the Office of the Comptroller of the Currency (OCC) alongside Sherrod Brown and Elizabeth Warren. Here’s a .

Here’s the rub, from Dave Dayen at Salon:

The vast majority of borrowers – 3.4 million – will receive $1,000 or less. To pick a category at random, 234,000 borrowers had a loan modification approved, were kicked out of their homes anyway, and will receive for their trouble – for having their home effectively stolen – a whopping $300 (for comparison’s sake, the third-party consultants got $10,000 per review).

HuffPo notes Reed’s role here:

Under questioning from Sen. Jack Reed, a Rhode Island Democrat, regulators came the closest to acknowledging that the reviews, which resulted more than $2 billion in payments by the banks to consultants, were poorly conceived and supervised.

exity of the task,” said Daniel Stipano, a top lawyer at the OCC. He cited the number of financial institutions, consultants and homeowners involved and the difficulty in negotiating state law as among the challenges that reviewers and regulators had to negotiate.

Dave explains how this hearing and the OCC mortgage fraud settlement relate to the broader housing collapse. Dave’s thrilled to see that the foreclosure fraud issue is FINALLY getting some play with the national press — with the tag-team effort by Reed, Warren, and Brown appearing — and even leading — on many national network news casts this week.

I have spent the better part of four years trying, with little success, to raise awareness aboutforeclosure fraud, the largest consumer fraud in the history of the United States. In fact, there’s a whole little band of us writers and activists and foreclosure fighters. We have provided multitudes of evidence about fake documents, forged documents, illegal foreclosures, foreclosures on military members while they served overseas, foreclosures on homes with no mortgages, breaking and entering into the wrong homes, suicides by foreclosure victims, and above all the complete lack of accountability for these crimes and abuses.

But instead of giving voice to thousands upon thousands of victims of illegal foreclosures, instead of documenting the banks’ criminal practices, maybe what we all should have done is simply let the Office of Comptroller of the Currency – part of the Treasury Department — and the Federal Reserve construct their own settlement with the banks. Then, when it utterly unraveled — as it has over the past couple of months — the unimaginable fraud heaped upon homeowners would get more attention than ever before, particularly from a frustrated and angry Congress led by Sen. Elizabeth Warren.

The OCC’s pathetic response to the housing crisis, its attempt to cover up its own corruption/ineptitude, and Warren’s star power make this the perfect moment to bear down on these issues. Reed deserves praise for helping to lead the charge — let’s hope he keeps plowing forward.

July 18, 2012July 18, 2012

Libor Scandal: Will Wall St. Get What It Deserves?

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

Jack Reed, Official Portrait 2008 — Sen. Jack Reed pressured regulators to launch criminal charges against fraudulent bankers.

Just over a week ago, the British and American governments announced the largest fine in history levied against Barclays PLC, just under half a billion dollars. The fine agreed to ignore criminal charges against Barclays itself, but current and past employees were not exempt. Well, after a letter from Democratic lawmakers (including Rhode Island’s Sen. Jack Reed) to the U.S. Justice Department and regulatory agencies urging criminal charges, that may well be in the works. According to The New York Times, Barclays traders may be among those slapped with criminal charges. Bloomberg reports that those charges could come as soon as September.

The City of Baltimore already filed a lawsuit back when this rate-rigging scandal broke. Now it comes to light that the attorney generals of New York and Connecticut are working together to investigate Wall Street banks over the scandal.

New York attorney general Eric Schneiderman was considered the most high-profile crusader against Wall Street excess until he was co-opted by the pro-Wall Street administration of Barack Obama. That resulted in the $25 billion settlement with America’s largest loan servicers, who were utilizing automated robo-signing to fraudulently foreclose on American homes. Prior, Mr. Schneiderman led a group of dissenting attorney generals who refused to accept the Dept. of Justice’s settlement, believing the banks deserved greater punishment. When he folded, the virtually all of the attorney generals fell into line with the Justice Department (Rhode Island’s attorney general Peter Kilmartin was with the Justice Department from the get-go).

Libor (London Interbank Offered Rate) is an average of the interest of borrowing for London’s banks. It is set by all of the banks submitting to their trade organization (the British Bankers’ Association) the rate they are borrowing at. These rates are then averaged and the average is declared. That is used to set interest on roughly $500 trillion in securities, and 45% of all U.S. mortgages. In the wake of the 2008 Global Financial Crisis, Libor became a measure of banks’ health as other standard measures became suspect and unreliable. In this case, Barclays has admitted to artificially manipulating rates downward.

This means while the interest the average consumer paid on their mortgage was lower, a state or municipal treasury or a large charity that had savings linked to Libor also saw lower returns. As did lenders who sold mortgages bundled into “residential backed mortgage securities”. So while the average person on the street might feel slightly good about the banks’ malfeasance working out for them, states and lenders are certain to feel quite angry.

Is It Time for the White House to Fight the Banks?

The common impetus behind both the Tea Party and Occupy Wall Street appear to have been that Wall Street got away with collapsing the world economy and over a trillion dollars in taxpayer money. And they never faced a single criminal charge.

The Libor scandal seems to be changing that. The British government announced plans to make it the government with the toughest regulations out of any economic center; the City of London (separate from Greater London) is the epicenter of Western capitalism.

Americans already despise Wall Street for its part in the collapse (Wall Street remains the institution most blamed for the bad economy). Wall Street banks, who strongly backed President Barack Obama in 2008, have shifted their financial support almost entirely to Republican challenger Mitt Romney. Barack Obama has mostly played as the banks’ best friend, his bipartisan so-called JOBS Act passed earlier this year further deregulated Wall Street (Rhode Island’s Senators voted against the act, whereas our Representatives voted for it).

But the Libor scandal may be a chance to put right the wrongs done by the administration and the U.S. government in not punishing the banks following the Global Financial Crisis. One hopes that President Obama would do so because it is the right thing to do. However, since the moral calculus has not appealed to this president in the past, perhaps the political calculus will. This is a rare case of good politics and good policy aligning.

With the big banks having cut the President loose, he does not need to worry about angering potential donors; indeed, charging bankers for the very real crimes they have committed seems likely to energize those who have long feared the President is a stooge of Big Banks. Furthermore, the Libor scandal (and the money-laundering over at HSBC) has proven beyond a doubt that the financial system cannot be allowed to police itself. When given the choice between theft and honesty, banking culture is so toxic they will praise theft before they stoop to honesty.

Unfortunately, Republican obstructionism is undoubtedly assured to block any chance of enacting tough new rules through legislation. And conservative litigation as regulators write new rules is also likely to prevent any real strengthening of the oversight under the flawed Dodd-Frank reform. This means all the government can do is press charges. Indeed, this very public action may be preferable from a political stance; the sight of bankers in court is likely to please many of the hundreds of American families who have wound up in foreclosure proceedings at the hands of such reckless prophets of our financial system.

February 13, 2012February 13, 2012

Lock-em-up-unless-they’re-bankers Kilmartin

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

Striking a vital blow against accountability, Attorney General Peter Kilmartin endorsed the “50-state” settlement on foreclosure fraud yesterday, led by the Iowa Attorney General, Tom Miller. The settlement essentially allows banks to skip away from the crimes they committed in the course of foreclosing on a few million people’s houses.

To recap: this settlement has been over a year in the making, and is intended to clean things up in the real estate market, absolving banks of responsibility for their misdeeds in exchange for money that will go to principal reduction, and also doing some short sales and refinancing and payoffs to unjustly foreclosed borrowers. These are good things, but there is a problem.

Nationally, we’re talking about $25 billion, which sounds like a lot, but last year JP Morgan’s bonus pool was around $10 billion. HUD Secretary Shaun Donovan says there is about $700 billion in negative equity in the country. Realistically, the program might help a million people, but there are 10.7 million mortgages underwater, and millions of people already foreclosed upon, also according to HUD.

Not only is the money not commensurate with the damage they caused, but it’s not going to be much help cleaning up, either. Kilmartin estimated Rhode Island would see “millions” from the settlement. The registrar of Essex County, Massachusetts, hardly the epicenter of the foreclosure epidemic, estimated last year that only 16% of the mortgages in his registry were valid, and of the rest, 27% were fraudulent. Over the past decade, the RI real estate market has been around $5 billion per year. Roughly similar numbers for the state of Rhode Island would have around a billion dollars in fraudulent mortgages per year, or around $8-10 billion total, give or take. It will take a lot more than a few million to clear all those titles and restore the damage done.

Why is the settlement so low? Maybe it’s because there hasn’t, until recently, been even a credible threat of prosecution for the crimes committed. Just to review, we’re talking about actual crimes — fraud, forgery, perjury — acts for which you or I would spend time in jail.

What’s also astonishing here is where this $25 billion will come from. It turns out that almost all of it will come from the owners of the securitized mortgages, the pension funds and other investors who bought these terrible bonds from the banks. Those owners will be dinged some of their interest payments, making their bonds even less valuable then they already are. It appears that most of the money will not come from the banks that caused the problem and profited so much from it. So much for even the simulacrum of accountability.

For everyone who thinks, “Oh, well, the banks were just foreclosing on people who didn’t pay their mortgage, anyway,” there is a big problem ahead. The bank’s self-invented mortgage registry (MERS) was not maintained, and was probably inadequate to the job it was assigned: keeping track of ownership. (Not to mention that it was probably an illegal enterprise in the first place, but put that aside for a moment.) This means that pretty much any property whose mortgage passed through MERS won’t be able to get a clear title. In turn this means a lot of claims on the title insurance companies, some of whom are likely to go under because of the mounting pile of claims. It also means time spent in court by people who can’t get a clear title to the property they own and money spent on lawyers to argue about them. Years from now, when you find yourself shelling out a few thousand dollars to clear the title to your house, you can comfort yourself in knowing that not only did none of the people who caused that problem have to pay any price at all, but most of them got rich doing it. What a country!

February 4, 2012February 4, 2012

AG Kilmartin, Hold Wall Street Accountable for its Fraud

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

Dear Attorney General Kilmartin,

Hold Wall Street Accountable for its Fraud

The rule of law must be applied equally to all people. Yet, the most massive organized crime spree in history has not only gone unpunished, but has actually been rewarded with trillions of dollars of bailouts and interest free loans to the criminals responsible. In order to re-establish trust in our political and economic systems, justice must be served.

Throughout the housing bubble era and its disastrous unwind, Wall Street committed fraud upon fraud against the American public and indeed the whole world. From the fraudulent origination of subprime mortgages; to the establisment of the Mortgage Electronic Registry System (MERS) to bypass the land registry system; to the illegitimate pooling and servicing agreements in the securitization process; to the false credit ratings then given to the consequent Mortgage Backed Securities and their derivatives; and finally to the illegal forclosures attained by robosigning false notes and affidavits; the whole process was and is criminal.

We, the people of Rhode Island, ask you, Attorney General Kilmartin, to not let these crimes go unpunished. Join other states like New York, Massachusetts, and Nevada in prosecuting Wall Street for mortgage fraud, and don’t sign on to any mortgage settlement that absolves the criminals of their responsibility.

Sign the petition here.

January 9, 2012January 10, 2012

Retail Stock Data Proves The Middle Class Is Imploding

Deprecated: Function get_magic_quotes_gpc() is deprecated in /hermes/bosnacweb08/bosnacweb08bf/b1577/ipg.rifuturecom/RIFutureNew/wp-includes/formatting.php on line 4387

A close analysis of stock market data is an excellent bellwether for determining the financial health of the middle class. Despite the meteoric rise of the market since its bottom in 2008, there are very negative omens for the middle class if one examines the market data more in depth. An analysis of stock prices and company performance in the retail sector shows a middle class that is rapidly losing purchasing power. In contrast, the data also shows that the high end or wealthy consumer is doing quite well.

An investment strategy that has proved consistently successful in the retail space has been betting against the prosperity of the middle class consumer. Investors have successfully gambled that the middle class consumer will continue to be pushed down to retailers that have traditionally catered to the lower income American consumer. Some examples of these companies are Dollar Tree, Dollar General, TJ Max, and Wal-Mart.

Retailers that traditionally catered to middle class shoppers, such as J.C. Penny and Kohls, have been losing market share to the “bargain retailers.” This trend is a reflection of the change in the shopping habits of the middle class. Middle class shoppers are feeling less confident with their financial stability and consequently are trading down to cheaper brands.

In contrast, the higher end retail shoppers appeared to be quite confident with their finances in 2011. Luxury retailers such as Neiman Marcus, Nordstrom, Saks, Tiffany, and Lululemon saw a healthy demand from their higher end customers.

The data for retail sales in 2011 clearly shows that the purchasing power between the middle class and the rich is widening very quickly. This trend should be carefully noted by all Americans both rich and poor. One only needs to read a bit of history to see that a disappearance of the middle class is one of the final markers before the implosion of an empire.

August 23, 2011January 6, 2012

Why do Big Banks care about Charter Schools?

Why Does JP MORGAN CHASE want to create a $325 million fund to invest in charter schools? Because they can make money off of them silly.

JPMorgan Chase Creates $325 Million Funding Initiative For High-Performing Charter Schools$50 Million in Grants Crucial Amidst Challenging Credit Markets

New York, May 4, 2010 – JPMorgan Chase announced today a $325 million initiative to support the growth of high-performing U.S. charter schools in today’s challenging credit environment.

“Many charter schools have expanded access to academic opportunities for students in all types of communities, so we shouldn’t let tough economic times bring them down,” said JPMorgan Chase Chairman and CEO Jamie Dimon. “Improving educational opportunities is a cornerstone of JPMorgan Chase’s philanthropic giving.”

The bank will provide $50 million in grants to community development financial institutions (CDFIs) focused on funding charter schools. In turn, these institutions will use these grants as permanent equity, which they will leverage to fund top-performing charter schools.

Additionally, JPMorgan Chase will work with the CDFIs to provide about $175 million in debt and approximately $100 million in New Markets Tax Credit equity to support the development of charter school facilities. This will allow the CDFIs to access Obama Administration financing programs designed to help charter schools meet facility needs.

JPMorgan Chase estimates that this initiative will help underwrite about 40 charter schools, which will serve more than 50,000 students throughout the term of the loan.

Initial CDFI partners include The Reinvestment Fund of Philadelphia, The Low Income Investment Fund of San Francisco, and NCB Capital Impact of Arlington, Va. Additional partners will be announced later in the year.

“The Low Income Investment Fund (LIIF) is proud to be one of the partners with JPMorgan Chase on this initiative. Through this financing initiative, JPMorgan Chase and LIIF will invest in exceptional educational opportunities for thousands of low income students,” noted Nancy O. Andrews, President and CEO of LIIF. “A key constraint to growth for many high performing public charter schools is their ability to finance facility development or enhancement. By providing an equity investment, JPMorgan Chase and LIIF will give schools access to affordable capital in a difficult credit environment.”

The grants to help charter schools are part of JPMorgan Chase’s larger $100 million grant initiative for CDFIs that also support small businesses, community healthcare centers, green initiatives and affordable housing. Details on the rest of the initiative will be announced later this year.

“JPMorgan Chase has been a committed partner to the CDFI industry by providing critical access to capital where it otherwise might not exist,” said Terry Simonette, President and CEO of NCB Capital Impact. “This new initiative continues that commitment by providing the critical capital that is required for charter schools to meet the need for access to quality education in low income and underserved communities.”

Despite the increasing demand by families across the country for charter schools, they have found it difficult to arrange financing for expanded and new facilities.

While public school districts can access the municipal bond market for long-term funding, charter schools almost always pay more for financing because lenders require higher interest rates from the relatively new industry.

“In these next seven years, this new investment by JPMorgan Chase in The Reinvestment Fund projects will allow us to create school opportunities for thousands of students,” said Jeremy Nowak, President and CEO of The Reinvestment Fund. “This major investment certainly positions the bank as a national leader supporting charter schools and meeting their significant unmet financial needs.”

JPMorgan Chase sees high potential for improving childhood education and community development through charter schools, and is committed to their development. The bank has been an active supporter of public school education, donating $181 million in education grants over the last five years. Additionally, the bank provided nearly $12 billion in financing to education institutions and school districts through lending and bond underwriting in 2009 alone.

Community development financial institutions that fund charter schools and are interested in applying for a grant through this new program should contact JPMorgan Chase at CharterSchools.CDFI@jpmchase.com.

About JPMorgan Chase
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.1 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.